Open AccessCOINTEGRATION BETWEEN STOCK MARKET INDICES AND NOMINAL EXCHANGE RATES: EVIDENCE FROM TRANSITION COUNTRIES
Author(s) -
Весна Пророк,
Slađana Paunović
Publication year - 2015
Publication title -
zbornik radova ekonomskog fakulteta u istočnom sarajevu
Language(s) - English
Resource type - Journals
eISSN - 1986-6690
pISSN - 1840-3557
DOI - 10.7251/zrefis1510035p
Subject(s) - cointegration , economics , econometrics , granger causality , stock market , stock exchange , capital market , exchange rate , variable (mathematics) , financial economics , monetary economics , mathematics , geography , finance , mathematical analysis , context (archaeology) , archaeology
This paper analyzes the interdependence between stock market indices and exchange rates in four transition countries: Croatia, Serbia, Hungary and the Czech Republic. The analysis is based on monthly data for the nominal exchange stock market indices and nominal exchange rates over the period from March 2010 to March 2015. The main objective of this work is to determine whether the exchange rates had a significant impact on future trends in the capital markets and vice versa. Empirical analysis has shown that the series are stationary in the first differences, and using both Engle-Granger cointegration and Granger causality test it has been shown, as well, that there is neither long-run nor short-run relationship between these two variables. In other words, it means that prediction of movement of one variable cannot be based on past values of other variable